EDITORIAL: Share the Ride

Rising material costs and material shortages may have plagued some of you over the past year. Is there any relief in sight?

Steve Larsen, medical and pharmaceutical business unit manager for Tapemark, says that over the past year he has experienced lead times as long as 18 weeks for some materials. The rolled goods manufacturer provides contract manufacturing and packaging services. Larsen believes that the long lead times can be attributed to a growing worldwide demand for flexible packaging.

Angela Roggenhofer, healthcare marketing manager, Americas, for converter Hueck Foils, confirms this increased worldwide demand, and adds that it is also driving up costs.

Supply and demand is not the only force at work. Roggenhofer says prices for oil-derived raw materials and liquids have gone up, including those for many substrates and coatings commonly used for pharmaceutical packaging.

And Jerry Bennish, vice president of sales and marketing, Amcor Flexibles—Healthcare, adds "substantial increases in energy costs have created huge pressures on all costs."

While rising prices and scant supplies haven't reached critical levels, there is some tension. "Producers of packaging are caught in between large companies, at the supply end and at the customer end," says Bennish. "The margins on packaging cannot absorb the cost increases. And customers dont want to accept the price increases they are unable to pass along."

Adds Roggenhofer: "Customers are asking for cost reductions, but we are facing material cost increases."

And healthcare product firms may be asking for more, for less. "Customers are asking suppliers to provide more information and services at the same time they are asking for less-expensive packaging," says Bennish. "This includes data on such properties as seal strength, shelf life, sterilization compatibility, and material strengths. Such data are becoming threshold requirements for providing new materials to customers."

Material users are beginning to shop around. "Our customers are asking us to find ways to reduce total costs, says Pete Belden, vice president of sales for contract packager Anderson Packaging Inc. "By working with several vendors for each type of material, we seek ways to mitigate any increases."

In response to material shortages, Tapemark's Larsen has been looking at dual sourcing. "It will help ensure our material flow."

FDA appears more open to such flexibility in recent years, at least when it comes to lower-risk drugs. The agency now allows a packaging change involving a solid oral-dosage formulation, for example, in their annual reports.

Material converters, too, are looking around for new options. "We are working on programs where cost is driving change in materials," reports Ralph Klein, marketing and account manager for International Converter Inc. The firm is working to "keep costs down and find alternate materials that will work for the customer."

Converters are also building flexibility into their operations. "The secret to staying in business is being flexible in machine changeover to keep your downtime low," says Roggenhofer. At the same time, however, Hueck is dedicating its large machines to large orders and small machines to small orders, while complying with the same quality standards, she says.

These days, cost pressures are weighing on both material converters and users. The solution is to work together to drive costs out of packaging. Materials are getting thinner and stronger. Now make them cost-effective.